A 20 Year History of Procter & Gamble Stock

After writing about the 20 year performance of Colgate-Palmolive stock, my Aunt Donna asked me about Dawn dish soap, which is owned by Procter & Gamble. I broke out the historical dividend charts and went to work to create a comparison of how an investor would have fared had they parked money in P&G twenty years ago and walked away, forgetting about it until now. Here is what I found …

Imagine it is the first trading day of 1991 and you have a single tax-free IRA with $100,000 in cash in it. You decide to invest in shares of Procter & Gamble. You buy your block of common stock, forgetting about the transaction for twenty years. A share of Procter & Gamble traded for $6.88 split-adjusted at that time so you would have been able to get the equivalent of 14,535 shares of stock.

In the twenty years that followed, despite multiple recessions, including the worst meltdown since the Great Depression, the dot-com bubble and the housing bubble, multiple international wars, ballooning government deficits, exploding national debt, and a maelstrom of regulatory changes in the financial industry, you would have prospered.

Specifically, your shares would have had a market value of $64.58 on the last trading day of 2010. That would give your 14,535 shares a total market value of $938,670. In addition, you would have collected $16.75 in cash dividends per share throughout the two decades you held the stock, including a one-time special dividend issued by the company in 2002 for the Jif/Crisco spinoff, meaning you’d have $243,461 in cash.

Your $100,000 in Procter & Gamble Stock Would Have Grown to $1,182,131

Your account, which began with $100,000, would be holding $1,182,131 in stock and cash. That is a return of 13.14% without dividends reinvested over twenty years.

Shares of Procter & Gamble have generated tremendous wealth for owners over the past two decades from manufacturing dozens of world-famous household brands.

“What about inflation?” you ask. A $1.00 bill in 1991 was worth only $0.62 in 2010 so the real, inflation-adjusted value of the account in 1991 dollars would be $732,921. That is still a real return of 10.47% compounded without dividends reinvested over 20 years.

That is one hell of a deal for someone who didn’t have to do anything except read the annual report each year to make sure that profits continued to rise, debt remained manageable, executives weren’t overpaying themselves, and the products the firm sold were still relevant to consumers. It’s even more impressive when you notice that we didn’t assume you reinvested your $243,461 in dividend income. You could have spent it, given it away, or even used it to invest in bonds to generate some interest income. Had you plowed it back into Procter & Gamble stock, you would have had even more wealth, and even higher dividend income, as you increased your ownership of the business.

Why don’t most people experience these types of returns? They trade. They try to “rent stocks instead of owning businesses”. Instead of focusing on finding a good business with a competitive moat, that generates high returns on non-leveraged equity capital, making sure they pay a fair (or cheaper) price than it is worth on a conservatively estimated basis, and holding on for a long time, they buy and sell stocks, generating commissions for their broker, spreads for market makers, taxes for the government, and needless volatility for other shareholders.

Oh, and one more thing: Just like almost every stock in the world, you would have experienced at least one or two 40% to 50% drops in the market value of your Procter & Gamble stock during your holding period. That is the price of generating wealth through stock ownership. If you can’t handle that, park your money in the bank and be content with the meager returns that are available. As Benjamin Graham said:

The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances. He should always remember that market quotations are there for his convenience, either to be taken advantage of or to be ignored. He should never buy a stock because it has gone up or sell one because it has gone down.” – The 1949 Edition of The Intelligent Investor

It’s always odd to try and fit your life story into a few lines but here is the short version: My name is Joshua Kennon. I’m 35 years old. My husband, Aaron, and I met and fell in love as teenagers. After graduating from high school together, we moved from the Midwest to the East Coast where we studied classical music and a wide range of liberal arts. Later, we returned to the Kansas City area to be near family.

During our early twenties, we started several internet companies. We spent much of the next decade semi-retired and managing our own wealth thanks to the financial independence those businesses helped us achieve. I also wrote a lot during this time. In fact, the odds are good that you’ve directly or indirectly encountered me many times without realizing it. For nearly 17 years, I was the Investing for Beginners Expert at what was then known as About.com. I am the co-author of The Complete Idiot’s Guide to Investing, 3rd Edition.

Recently, Aaron and I came out of retirement to launch Kennon-Green & Co., a global asset management firm that specializes in value investing for affluent and high net worth individuals, families, and institutions. These days, we spend our time running and growing the firm, as we plan on it being the institution through which we pass on our own family’s wealth to our future children and grandchildren. The experience, particularly meeting such incredible people, has been one of the most rewarding of our lives. It’s a rare thing to have a career that allows you to not only do what you love for a living, but to do it with people you admire, respect, and like. We feel like two of the most blessed guys in the world.

This personal blog is a place where I talk about some of the things that interest me – cooking, finance, entrepreneurship, politics, history, economics. I’m really proud of the community we’ve built, in no small part because the typical reader around here is exceptional.

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IMPORTANT LEGAL INFORMATION: This is a personal blog intended for academic, educational, and social engagement among members of a like-minded community. Nothing on this site is intended or should be construed as investment advice, financial advice, tax advice, or legal advice. You are solely responsible for your own financial decisions, agree that you will seek the advice of your own qualified professional advisors, agree that you, and you alone, are solely responsible for any financial consequences or losses as a result of your actions, and use of the site constitutes your agreement that you will not rely upon any information found on the site, including the comments. All text, images, and resources are provided on an “as is” basis with no guarantee of accuracy and with no obligation to update or correct information. For more information, read the terms and conditions. Copyright Joshua Kennon. All Rights Reserved.